REVERSE CHARGE IN SERVICE TAX WEF 01.07.2012 NEW NOTIFICATION 30-2012

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Reverse Charge Mechanism in service tax is not a new concept. Under this scheme, service tax is payable by service recipient  instead of service provider . Under this charge service receiver have to register himself under service tax . Further service receiver can not claim general exemption limit of 10 Lakh rupees. So he has to pay even on few rupees of service received.



It will be very harsh on service receiver end where he has received services falls under reverse charge for only few hundred rupees but due to it he has to register himself in service tax and have to file service tax return on prescribed interval.Moreover under service tax act Nil return is also mandatory and every registered person have to file half yearly return .


Now after applicability of new service tax regime, new services which is very common like advocate,Hiring vehicle for passenger , has been added under reverse charge.


Complete List is given as under.This is applicable from 01.07.2012.Few new services has been added with partial reverse charge .In case of these services both service receiver and provider has to pay service tax in prescribed ratio.

In case of Reverse charge mechanism Point of taxation is Date of Payment to service provider.(Rule-7)
(read complete details of Point of taxation under reverse charge and Exception upto 30.09.2014)

Point of taxation rule under reverse charge has been amended with effect from 01.10.2014

read Detailed Analysis of  Provisions related to works Contract ,Meaning , Valuation, effective Service Tax rate on works contract  and reverse charge on works contract wef 01.07.2012




Sl.No.
Description of a service
Percentage of  service tax payable by the person providing service
Percentage of service tax payable by the person receiving the service
1
services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business
Nil
100%
2
services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road
Nil
100%
3
services  provided or agreed to be provided  by way of sponsorship
Nil
100%
4
services  provided or agreed to be provided  by an arbitral tribunal
Nil
100%
5
services  provided or agreed to be provided  by individual advocate
Nil
100%
6
services  provided or agreed to be provided  by way of support service by Government or local authority
Nil
100%
7
(a)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on abated value.
(b)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on non abated value.
Nil




100 %




8.
services  provided or agreed to be provided  by way of supply of manpower or Security services(inserted in notification 45-46 dated 07/08/2012)  for any purpose
75 %
9.
services  provided or agreed to be provided  by way of works contract
50%
50%
10
any taxable services  provided or agreed to be provided  by any person who is located in a non-taxable territory and received by any person located in the taxable territory(IMPORT OF SERVICES)
Nil
100%
11
provided or agreed to be provided by a director of a company to the said company
(Inserted through notification 46-47/2012 dated 07/08/2012)
100%

  1. Telecommunication
  2. General Insurance auxiliary
  3. Mutual Fund distributor services.
Support services By Govt or Local authority :Section 65B(49) of Finance Act, 1994 provides the definition of ‘support services’. Support services in respect of which service tax is payable by business entity receiving such services from government or local authority are as under: 
(i) Infrastructural Support Services; 
(ii) Operational support Services; 
(iii) Administrative Support Services; 
(iv) Logistic Services; 
(v) Marketing Services; 
(vi)  Advertisement Services; 
(vii) Promotion Services; 
(viii) Construction or Works Contract Services; 
(ix) Security; 
(x) Testing and Analysis 
(xi) Any other support of any kind comprising functions that entities carry out in ordinary course of  operations themselves but may obtain as services by outsourcing from others for any reason whatsoever.  

Partial Reverse charge :But few new services has been added in the List and for the first time in service tax act /regime partial reverse charge under service tax has been introduced. Now both service receiver and service provider have to pay tax as per prescribed % in case of four services.

The reverse charge is applicable if service receiver /service provider satisfy few condition .In other case service provider has to pay tax on full amount of service.


Sl.No.
Description of a service
SERVICE PROVIDER
SERVICE RECIVER
1
services  provided by an insurance agent to any person carrying on insurance business
ANY
ANY
2
services  provided or agreed to be   provided  by a goods transport agency in respect   of transportation  of goods by road
where the consignor or the consignee  is,—
(a)  any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
(b)  any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;
(c)  any co-operative society established by or under any law;
(d)  any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder;
(e)  any body corporate established, by or under any law; or
(f)  any partnership firm whether registered or not under any law including association of persons;
3
services  provided or agreed to be   provided  by way of sponsorship
any
body corporate/partnerhip firm
4
services  provided or agreed to be   provided  by an arbitral tribunal
Arbitral tribunal
Business entity with a turnover more than rupees ten lakh in the preceding financial year;
5
Legal Services provided
by advocate (whether
individual or firm) to any
business entity  
individual or firm
Business entity with a turnover more than rupees ten lakh in the preceding financial year;
6
services  provided or agreed to be   provided  by way of support service by Government or local authority
Government /Local authority
Business entity
7
(a)   services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on abated value.
Individual (prop ) /Partnership firm (registered or unregistered)           /HUF
any company formed or registered under the Companies Act, 1956 (1 of  1956) or a business entity registered as body corporate located in the taxable territory;
(b) services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on non abated value.
8
services  provided or agreed to be   provided  by way of supply of manpower or security services  for any purpose
9
services  provided or agreed to be   provided  by way of works contract
10
any taxable services  provided or agreed to be provided  by any person who is located in a non-taxable territory and received by any person located in the taxable territory
any
any
11
provided or agreed to be provided by a director of a company to the said company

Read more: http://www.simpletaxindia.net/2012/08/security-services-director-covered-in.html#ixzz230dkwCQg
(inserted by notification 46/2012 date 07/08/2012)
Director (individual)
Company


Now, w. e. f. 07.08.2012, following additional services shall be covered by reverse charge mechanism(Notification 45/2012 and 46/2012 dated 07/08/2012)

Read FAQ about Director and Security Services Under reverse charge Mechanism 

Sl. No.
Nature or Description of
service
% of Service Tax payable by service provider
% of Service Tax payable by service Recipient
1.
Security Services provided by Individual, HUF, partnership firm or AOP to body corporate business entity
[Security services" means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity- Rule 2(fa) of Service Tax Rules, 1994]


25%
75%
2.
Services  by a director of a company to the said company
Nil
100%


Explanation-I. - The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

Explanation-II. - In works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.

Register for Service Tax :So from above now what you should do is that if you are receiving any of these services and fall under specified category of service receiver   then you must register your self for service tax .
Amend service tax registration :If you have already register under service tax act and receiving one of new service added under reverse charge at sr no 4-10 then you have to add this specific service in your service tax registration certificate.

Suppose if a Company is doing some trading of shares and have not registered under service tax but  you are hiring vehicle for employee or director for travelling and doing marginal expenses on travelling . After this amendment company has to register under service tax act and have to pay 100% /40 % of service tax as the case may be and have to file service tax return.

Likewise if a business entity has taken a legal opinion from individual advocate or Firm of advocates then business entity have to pay 100% of service tax due on fees and have to register under service tax . 

Suppose they have just paid Rs 2000  in full year even then business entity have to register under service tax act and have to deposit 12.36 % tax on 2000/- Rs and have to file service tax return .

And for such work he has to take again professional help.?

After 01.07.2012  Service tax is not payable by Individual advocates and Advocate Firm and service receiver (business entity) have to pay tax on services received from Individual advocate.

All of above amendments are applicable from 01.07.2012.

This is as per notification 30/2012 dates 20.06.2012 Vide notifications 45 & 46/2012 ST Dated 07.08.2012, services provided by non employee directors to the Companies and security agencies have also been subjected to the levy of service tax under Reverse charge mechanism.

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